Wednesday, 8 March 2017

From the mid
1980s until the late 1990s the one certainty about superannuation policy in New
Zealand was its uncertainty. Every government played around with it, to the
detriment not just of superannuitants of the time, but also of those
approaching retirement and hoping to be able to plan their futures with some
certainty. National promised to repeal Labour’s infamous 1984 surcharge, only
to replace it with something just as draconian in 1991. That was gradually
watered down during the 1990s, and a multiparty accord established, which Labour
then walked out of when it had succeeded in taking superannuation off the
political agenda and Labour found it no longer had a weapon to beat the
government with. Then National reduced the relativity of the rate of
superannuation to the average ordinary-time wage, which was subsequently
overturned by Labour and the current formula arrived at. A period of
superannuation peace and stability was to ensue for about fifteen years.

It has to be said
that none of us who were involved in superannuation politics of the time
covered ourselves with any glory and that at least one generation of New
Zealanders was given no reason to trust politicians on superannuation policy.
It is probably true that Sir Robert Muldoon’s overly-generous 1975 election
bribe of 60% of the average wage at age 60, developed as a simple reaction to
the Kirk Government’s much more complicated contributory 1974 scheme which
would have taken until 2014 to reach full maturity, was to blame for all this,
but that was of little consolation at the time, or now. Superannuitants simply
felt betrayed.

Over the last 15
years, a measure of stability has returned, and retirees, near-retirees and
their families have been able to plan their futures with a measure of
certainty. All of which raises interesting questions about National’s surprise
announcement this week, that as a response to the ageing population, it plans
to shift the age of entitlement from 65 to 67 between the years2037 and 2040, affecting everyone born after
the start of 1974. In an eerie throwback that suggests we could be about to get
on the superannuation merry-go-round all over again, Labour now finds it
convenient to renege on the raising the age policy it promoted at the last two
elections.

It could be said
that National has learned a lesson from the past with the long time-frame it
has for the changes it is now proposing , although those affected, now in their
early 40s and younger, may see it differently, having just paid off their
student loans, and now raising their young families and meeting the mortgage
costs. They probably will not feel downright betrayed as their grandparents did
in the 1980s and 1990s, but they most likely will feel somewhat cheated.

The bigger risk
is that National’s signalled intent – that is all it is at this stage, with
eight general elections due before it takes effect in 2040 – sets off a further
round superannuation uncertainty, the last thing anyone wants or deserves. And
that raises the wider question about whether age adjustments are the best way
to manage future superannuation policy. While it is true people are living –
and working – longer, it is also true that the advent of Kiwisaver in 2007 has
enabled many people to build up large retirement nest eggs, making them less
reliant on New Zealand Superannuation in the future. At the same time, the
focus now comes on the demographics of those with short lives post about 60,
and how poorly they are catered for at present, In short, despite having paid
their taxes all their lives, there are many who die worn out and exhausted
before ever reaching 65, or shortly thereafter. And they get no, or very
little, superannuation.

That is why
UnitedFuture’s focus is on Flexisuper (the option to take a reduced rate of superannuation
from the age of 60 if one wishes, or a higher rate if uptake is delayed to age
70) and compulsory Kiwisaver, rather than adjusting the basic age of
entitlement from 65. That package addresses the issue of those worn out at 60,
and also sends a clear signal about the value of long-term personal savings,
and less reliance on the state pension. But, most importantly, it places
control of retirement choices and income back in the hands of the individual,
not the state. Under Flexisuper and compulsory Kiwisaver, people will be able
to back their own choices and know they will not be interfered with by
governments changing their minds.

The one constant
in the superannuation debate of the last couple of generations has been that
people have craved certainty. They opted for Muldoon’s unrealistic “too good to
be true” scheme in 1975 because it was simpler and more immediate than the Kirk
scheme. They berated Labour and National governments in the 1980s and 1990s for
“mucking up” their retirement plans. Now, when the superannuation spectre is
being raised again, many may well see it as too far in the future to get
exercised about immediately. An irritant, rather than a body blow, but
certainly an opportunity for people to take control of their own retirement
destiny, regardless of what the state might impose.